Microsoft, Salesforce settle patent suit

Microsoft said Wednesday that it has settled a patent dispute with Salesforce.com, with both companies licensing each other's patents and the cloud software firm paying an undisclosed sum to Redmond.

Financial details were not disclosed.

"We are pleased to reach this agreement with Salesforce.com to put an end to the litigation between our two companies," said Microsoft deputy general counsel Horacio Gutierrez in a statement. "Microsoft's patent portfolio is the strongest in the software industry and is the result of decades of software innovation. Today's agreement is an example of how companies can compete vigorously in the marketplace while respecting each other's intellectual property rights."

Microsoft had sued Salesforce in May. At the time it said that it had notified Salesforce more than a year ago about the alleged infringement. The company refused to comment on whether it had notified any other online software makers that it believes infringe on its patents. However, in Wednesday's release, the company made note of the strength of its patent portfolio regarding online software.

"Salesforce.com is pleased to put this litigation behind us," a company representative said in a statement. The company declined to comment further and would not say whether the settlement amount will be material to company earnings.

There had been hints of the dispute, without names, prior to the May suit. In a January filing with the Securities and Exchange Commission, Salesforce reported that a large tech company had said that it was infringing on their patents.

"During fiscal 2009, we received a communication from a large technology company alleging that we were infringing upon some of their patents," Salesforce said in the regulatory filing, known as an 8-K. "We continue to analyze the potential merits of their claims, the potential defenses to such claims and potential counter claims, and the possibility of a license agreement as an alternative to litigation. We are currently in discussions with this company and no litigation has been filed to date."

Salesforce said in the filing that it could offer no assurances it would be able to prevent a lawsuit, but added that "the resolution of this claim is not expected to have a material adverse effect on our financial condition, but it could be material to the net income or cash flows of a particular quarter."

In recent years, Microsoft has aggressively been trying to license out its own patents--and has been frequently the target of patent infringement suits--but the software maker has only rarely gone to court to pursue its claims. The three previous times it had initiated a patent suit included actions against Belkin and TomTom, both of which also quickly settled.

Microsoft and Salesforce compete head-to-head in the market for customer relationship management, or CRM, software. Microsoft offers its CRM product both in hosted and on-premise form, while Salesforce touts itself as "No Software" because its product is all-hosted. The two are also growing rivals in the market for the underlying platform to host online software, with Salesforce's Force.com and Microsoft's Windows Azure.